Poland's producer price index (PPI) rose 20% y/y in March following a revised expansion of 16.1% y/y the preceding month, the country’s statistics office GUS said on April 21.

Growth in the index was driven by expensive energy commodities and industrial metals, as well as by the weak zloty – all the effects of the war in Ukraine. The PPI thus remains at one of the highest levels since the late 1990s and its growth is all but certain to be transmitted to headline inflation. 

“The outbreak of the war in Ukraine worsened the inflation outlook, although the stabilization of prices in international markets should help ease inflation growth in the coming months,” Bank Millennium said.

Still, the PPI is yet another indicator to affirm the National Bank of Poland in its drive to tighten monetary policy to continue. “We expect hiking of the interest rates by 50bp in May and June,” Bank Millennium said. That would bring the reference interest rate to 5.5%.

Prices in the most-weighted manufacturing segment grew 17.5% y/y in March, after expanding a revised 14.5% y/y the preceding month, the breakdown of the data showed.

Mining and quarrying prices grew 24.2% y/y in March (February was +22.1% y/y following revision).

Electricity, gas, and utility prices expanded 37.3% on the year in March after a revised expansion of 26.4% y/y in the preceding month. The water supply segment saw prices add 0.5pp to the revised February figure to come in at 5.4% y/y.

In monthly terms, the PPI grew 4.9% in March after a revised 1.1% m/m in February, GUS data also showed.

The index grew 5.9% m/m in mining and quarrying and 4.3% m/m in manufacturing. The PPI also added 9% m/m in the utility segment and 1% m/m in water supply.